WASHINGTON (FNS) -- A new plan to raise the minimum wage has surfaced on Capitol Hill and is raising concerns in the supermarket industry.
While the industry is skeptical of the plan's chances of passage this year, industry leaders aren't sanguine that it will go away without a fight.
Sen. Edward Kennedy, D-Mass., has unveiled a wage floor increase proposal that would raise the wage to $7.25 an hour by Sept. 1, 2002. An identical House bill is to be introduced Tuesday by David Bonior, D-Mich.
Under the two-phase increase approved by Congress a year ago, the current $4.75 minimum wage will rise to $5.15 an hour Sept. 1. Kennedy's plan would raise it 50 cents hourly in each of the next three years: to $5.65 Sept. 1, 1998; to $6.15 an hour on that date in 1999; and to $6.65 on that date in 2000. He would go further and raise it 30 cents an hour in each of the following two years, to $6.95 an hour Sept. 1, 2001 and to $7.25 an hour Sept. 1, 2002.
Bonior acknowledged the measure was unlikely to advance legislatively in the House this year, but noted he was "beginning the process." Still, the legislative initiatives are drawing strong reaction from the industry.
"Not on any issue can we take for granted that it won't be passed," said Thomas Zaucha, president of the National Grocers Association, Reston, Va. "Obviously, we have already done a significant amount of research on the matter and our first order of business is to go out and survey and determine the impact that last year's minimum wage increase has had."
Retailers staged a valiant but unsuccessful fight last year to defeat the increase, which unexpectedly gained momentum in the election year. Zaucha predicts that Kennedy is positioning the bill to make another election-year run at raising the wage floor.
House and Senate Republican leadership, however, may be better prepared after last year's experience to defeat the measure, Zaucha said.
A spokesman for Food Distributors International, Falls Church, Va., said the association was also opposed to the additional increase and would fight to defeat it. The Food Marketing Institute, Washington, could not be reached for comment.
A prime argument of the industry, that higher wages would force employers to cut jobs, has been lost, however, because of the strong economy. Labor Department data shows that June employment in the industry stood at 3,489,000 jobs. That number was up 10,000 jobs from May 1997 and represented a 62,000-job increase over a year ago.
Zaucha noted that a higher wage could slow progress being made on a joint business-government enterprise aimed at providing students with job skills in the classroom before they enter the job force. The grocery industry nationwide has participated in the ambitious project, and recently completed drafting skills standards needed for entry-level workers that would be taught in schools. If the minimum wage is raised, it could be more difficult to hire entry-level workers moving from school to work, Zaucha said.
"We're looking to expand opportunities for young people and raising the cost of entrance works against that," he said.
A balanced budget bill currently being devised by the House and Senate includes several items that are aimed at offsetting the effect the higher wage floor had on employers. For instance, it includes an extension of a work opportunity tax credit, which gives employers tax breaks on a portion of the salaries they pay qualifying workers who are disabled or disadvantaged.
Another item, while disappointing to the grocery industry because of its limited scope, would reduce estate taxes on family-owned businesses. The current law levies taxes of up to 50% on the assets of family-owned businesses when a principal dies. Current House and Senate reform proposals would raise the level of assets exempt from the levy from $600,000 to $1 million. The House plan would incrementally raise the exemption to $1 million over the next 11 years, but includes a provision that would give an additional $1 million exemption to family-owned businesses.
Kennedy based much of his argument for another wage increase on a recent study by the Economic Policy Institute. The 16-page report found that despite the last increase, employment opportunities for teens and young adults, two groups usually vulnerable to job cuts, were not harmed by the hike. The report also noted that20the benefits of the hike went to low-income working families.
"The bottom line is clear," Kennedy said. "Employment does not go down because the minimum wage goes up. The overall conditions of the economy determine the levels of employment for all sectors of the work force. Reasonable increases in the minimum wage have no significant effect on these levels."
